Guernsey Funds Forum Discussed Industry Trends

by Jason Gorringe, Lowtax.net, London
28 May, 2015

Investment strategies for listed funds have widened in scope in the past 12 to 18 months, Tom Attenborough, Head of Large Caps, Primary Markets at the London Stock Exchange (LSE), told the recent Guernsey Funds Forum 2015.

Attenborough said he agreed with the event's keynote speaker Guy Hands, Chairman and Chief Investment Officer of Terra Firma Capital Partners Limited, that investors were once again far more willing to take risk. Attenborough said it had resulted in a diverse issuance calendar with trends emerging in the areas of alternative energy, leasing, microcap equities, debt-collective strategies, and non-bank lending.

"The listed fund market is certainly evolving. It has been hugely active in recent times. And yes, there have been a wide variety of different investment strategies that we have seen come through with listed funds in the last 12-18 months," Attenborough said. "I think whilst we at the LSE have not specifically been encouraging esoteric, and the more sort of wild and wacky, investment strategies, clearly, going back to what Guy [Hands] said, risk appetite has got ever greater. The dialogue between what managers want to do and what investors are prepared to tolerate has been very, very healthy, and that is why I think you are seeing a proliferation of the sort of transactions that can get done."

Ian Sayers, Chief Executive of the Association of Investment Companies (AIC), said the size of funds had also been on the increase with investors once more being attracted by larger IPOs and the additional liquidity those funds possess. He said: "I had a look back over 10 years and worked out what the average size of the IPO was. I looked at the boom years - I didn't look at the crisis years, because that affected everything - and in 2006-7, the average size of an IPO was GBP150m (USD229m). In the last two years, which have been sort of boom years as well, it has almost doubled from that."

Sayers said research by Winterflood had shown that discretionary managers, who were consolidating and getting bigger, were now after larger funds. He said that in just one year the percentage of managers who would consider investing in a fund below GBP100m had fallen from 70 percent to 50 percent, with the research going on to say that managers wanted funds of "GBP200m, or even GBP250m."

"The other thing we have seen in the sector is smaller launches at the start, which then try and grow pretty rapidly afterwards," added Sayers. "That is part of the reason, again, why if you look back before the financial crisis, IPOs exceeded secondary fundraising almost every year. After the crisis, secondary fundraising has taken over. There have been other reasons for it, premiums and things like that, but it just has the people to grow. We have had quite a few funds start sub-GBP100m and grow, and it becomes a virtuous circle, because as soon as you get up to GBP150m or GBP200m, another group of investors suddenly becomes interested in it."

However, while Sayers believes the average size of IPOs is on the rise, he and Ravi Anand, Head of Corporate Finance and an Executive Director at Dexion Capital, both expect to see a reduced level of total fundraising during 2015 compared with 2014.

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